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Elan Corporation recently announced that the first patient in its phase IIa study on ELND005 has been dosed. Elan is developing ELND005 for the treatment of Down syndrome.

The phase IIa study will be evaluating the safety and pharmacokinetics of ELND005 compared to placebo in young adults suffering from Down syndrome without dementia, and will also include select cognitive and behavioural measures.

The company mentioned in its press release that currently there are no approved drugs for the treatment of cognitive dysfunction in Down syndrome.

Apart from Down syndrome, ELND005 is also being developed for the treatment of Alzheimer’s disease (AD). In Jul 2013, the U.S. Food and Drug Administration (FDA) granted fast track designation to ELND005 for the treatment of neuropsychiatric symptoms in AD.

Elan was currently in the news as Perrigo Company (PRGO - Analyst Report) announced its intention to acquire the Irish company for approximately $8.6 billion. The cash and stock deal, cleared by the boards of directors of both companies, is expected to close by the end of calendar year 2013.

Following the closure of the deal, the shareholders of Perrigo will own approximately 71% of the merged entity while Elan shareholders will possess the balance. As per the terms of the deal, each stockholder of Elan will be entitled to receive $6.25 per share in cash from Perrigo following the closure. Furthermore, each shareholder of Elan will receive 0.07636 shares of the merged company for each Elan share.

We note that Elan currently receives royalty payments at 12% on worldwide net sales of the multiple sclerosis drug, Tysabri, after it sold the drug’s stake to Biogen Idec Inc. in April this year. After the first year, Elan is expected to receive a royalty of 18% on up to $2 billion of global net sales of Tysabri and 25% thereafter on over $2 billion of global net sales of Tysabri.

Elan presently carries a Zacks Rank #2 (Buy). WuXi PharmaTech (Cayman) Inc. (WX - Snapshot Report) also carries a comparable rank.

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